Knowledge Sharing Conference
ERIA and Sumitomo Corporation Talk Decarbonisation of Thermal Power Plants and CCUS Potential in Indonesia
The 15th Knowledge Sharing Virtual Conference, 24 July 2024: Carbon capture technology is integral to the decarbonisation pathway for the Asia Pacific region and ASEAN Member-States, particularly in hard-to-abate sectors and power plants. Through carbon capture, including direct air capture with carbon storage, ASEAN can reduce its emissions by around 565 Mt-CO2 by 2060. With demographic and economic growth expected to continue in Asia, Carbon, Capture, and Storage (CCS), as well as Carbon, Capture, Utilisation, and Storage (CCUS) is poised to be of increasing importance for the region. However, challenges in CCS deployment in Asia remain, comprising technology development, legal framework, and financing availability. Similarly, Indonesia faces these exact problems in its push to transform its energy system, especially its thermal power plants, as it moves ahead with its decarbonisation strategy.
Sumitomo Corporation conducted a feasibility study from October 2023 to March 2024 on applying CCS to Indonesia’s thermal power plants. The company strives to contribute to Indonesia’s decarbonisation pathway, ensuring stable power supply and sustainable economic growth. Using a case study approach, the company selected Units 5 and 6 of Tanjung Jati B (TJB) coal-fired power plant in Central Java as the carbon dioxide (CO2) emission source as well as the Corridor gas field in South Sumatra as the CO2 storage site. To further analyse the viability of decarbonising Indonesia’s power sector, Sumitomo Corporation examined two CO2 transportation methods: pipeline and ocean transport. In doing so, the cost estimates of the CCS value chain are better understood, including CO2 transportation and the impact on electricity prices. Sumitomo Corporation and the Economic Research Institute for ASEAN and East Asia (ERIA), as the secretariat for the Asia CCUS Network (ACN), outlined the study during the 15th ACN Knowledge Sharing Conference, entitled “Decarbonisation of Thermal Power Plants and CCS Business: Indonesia Case Study.”
Mr Shigeru Kimura, Special Advisor to the President on Energy Affairs, ERIA began his Opening Remarks by underscoring how CCS/CCUS is a remarkable technology that could assist Asia and the world to achieve their decarbonisation goals. Detailed studies, such as the one carried out by Sumitomo Corporation, regarding the CCUS value chain are crucial to advancing CCUS projects in Asia. Sumitomo’s study on CO2 transportation is indispensable for Indonesia and Asia as it provides a detailed picture of the CCUS value chain and insights into the CCUS market globally and in Indonesia. Mr Kimura concluded his speech by encouraging ACN’s 200 supporting members to submit their proposals on CCS/CCUS to the ACN to spur CCUS advancements in the region.
The event moderator, Dr Gusti Sidemen, CCUS Research Fellow, ERIA, explained that the latest knowledge sharing conference’s topic was selected ‘to promote collaboration amongst stakeholders in ASEAN and East Asia region’ considering how fossil fuels continue to play a significant role in the energy mix of the two regions. According to an ERIA – East Asia Summit Energy Outlook study, coal (39.5%) and natural gas (21%) are predicted to be the dominant fuel sources in ASEAN and East Asia by 2050 under the business-as-usual scenario. Under the carbon neutrality scenario, with CCS, the combined share of coal and gas is expected to remain high comprising over 40% of the power mix by 2050. Dr Sidemen stated, ‘With such high dependency on fossil fuels, the region of ASEAN and Asia will rely on CCS/CCUS development,’ and that ‘CCS/CCUS will become an important part of the pathway for all countries to reach zero emissions.’
Mr Wataru Sato, Head of CCUS & Subsurface Energy Business Unit, Sumitomo Corporation opened the Presentation Session by introducing Sumitomo Corporation and its interest in energy transformation. The company’s energy transformation business group has six special business units in which the energy innovation initiative and Indonesia energy solution were highlighted during the session. The aim of Sumitomo’s energy transition initiative is ‘the creation of next-generation business that generate new demand, synergy, and innovation’ which are driven by three pillars:
- Carbon-free energy development; comprising hydrogen, ammonia, CCUS, and bioenergy.
- New power and energy services development; comprising green power, energy storage, and hydrogen.
- Carbon management; comprising forest resources and carbon trading.
Mr Sato explained that within Sumitomo Corporation’s energy transformation unit, the company has established international ties with local CCUS developers for various projects, including in Canada, the US, the UK, Nordic countries, Oman, Australia, and Indonesia. ‘Further, we are thinking to make cross-border CO2 transaction from Japan to potential storage countries,’ he shared.
Mr Soichiro Kunihiro, Leader of CCUS & Subsurface Energy Business Unit, Sumitomo Corporation narrowed his presentation on the global and Indonesian market landscape for CCUS and also debriefed the audience regarding the feasibility study ‘on the application of decarbonisation technologies of CCS to thermal power plants in Indonesia upon assuming CCS value chain.’ Existing research estimates that CCUS can abate 4.1 gigatonnes (GT) of global CO2 emission by 2050 and it is expected to make up 14% of the share of CO2 emissions reduction solutions by mid-century. The demand for CCUS will largely be driven by power generation, natural gas processing, and hydrogen or ammonia production; it should be noted that the primary source of power generation will continue to be from coal, especially in Asia. He stipulated, ‘It is expected that coal-fired power plants will be retrofitted with large-scale CO2 capture technologies to be sustainable towards the future.’
In the Indonesian context, CCUS is predicted to encompass 19% of the 710MT of CO2 in total CO2 reduction, or 135 million tonnes per annum (Mtpa), by 2050. Mr Kunihiro added, ‘Since Indonesia’s economy still relies on crucial sectors like manufacturing, steel, power generation, fertilizer, and cement, CCUS will be expected to play a significant role.’ Moreover, there are 15 CCUS projects, mainly concentrated in Sumatra and Java, that are in the study/preparation stage and are targeting onstream around 2030. Sumitomo Corporation’s study selected the TJB’s Units 5 and 6 which are coal-fired power plants with an approximate combined capacity of 2000 megawatts (MW). Mr Kunihiro stated that the power generation scheme is Build, Own, Operate, and Transfer in which the project lifespan is 25 years after the commercial operation date in 2022. On the other hand, the Corridor gas field has a massive CO2 storage potential of around 600 million tonnes (MT); the Suban field that is located within the Corridor gas field has an expected capacity of approximately 400MT of CO2 storage.
Based on the study, there are three primary challenges to note regarding the CCS value chain in Indonesia. Although there is sufficient CO2 storage potential to store all the emissions from the coal-fired power plants, the distance between the TJB units and the gas field is extremely far at 1,148 kilometres (KM) using the pipeline transportation concept. Another key issue is that there is no existing infrastructure ‘across capture, transport, and storage throughout the value chain’ which will have to be developed along this long distance. Mr Kunihiro emphasised the importance of CCS regulations and praised the Indonesian government’s ministerial regulation on CCS/CCUS in 2023 and hoped that the regulation would be continuously improved in the coming years. As such, Mr Kunihiro highlighted three key areas to enhance business opportunities: government support, technical implementation, and partnership financing availability.
Mr Kunihiro additionally explained the details of the case study via ocean transport (Case-A) and pipeline transport (Case-B) in his presentation. It is worth noting that the study does not cover the cost site purchase, special land clearing, cost of electricity or coastal reclamation, among others. The TJB power plants emit around 13MT of CO2 per annum and the capturing percentage is around 95% thus the total CO2 amount over 25 years is around 325MT per annum. According to the study, Case-A will require seven vessels of 48,000 tonnes of gas to transport 13MT of CO2 per annum from the emitting point to the storage point. The approximate cost for Case-A’s capital expenditures (CAPEX) is approximately $5.7 billion and the operational expenditures (OPEX) over the course of 25 years is around $20 billion. Based on the calculations, the unit cost for Case-A would yield $63.7 per tonne of CO2; this figure is comparable to a 2022 ERIA study in which ocean transport would yield $62.8 per tonne of CO2 via ocean transport. Lastly, $0.0742 per kilowatt-hour (kWh) must be added to the current electricity tariff for TJB Units 5 and 6 using CCS.
Case-B will require a 1,148-kilometre pipeline to reach the storage point in Sumatra, and the CAPEX is expected to be $9 billion due to the long distance of the pipeline in comparison to the CAPEX of Case-A. The OPEX is projected to be $23 billion over the course of 25 years and the unit cost is expected to reach $72.4 per tonne of CO2. Similar to Case-A, there is a negative impact on the electricity tariff of TJB Units 5 and 6 under the pipeline transport where $0.0947 per kWh will have to be added to the existing tariff.
Mr Kunihiro highlighted a study carried out by Indonesia’s state-owned company, PT Perusahaan Listrik Negara (Persero) (PLN), which assumed the total CCS cost would fall in the range of $89 per tonne of CO2 up to $103 per tonne of CO2, including the capture, storage, and transport. ‘According to the average cost, this will lead to the increase in electricity cost of up to $0.10 per KWh,’ Mr Kunihiro explained. PLN calls for profit sharing, project cost support, and carbon tax adjustment to ensure CCS projects are economically viable. Mr Kunihiro added that special mechanisms such as profit sharing, government support for CCS project financing, and incentives for CCS development should also be encouraged. Mr Kunihiro ended his presentation by calling for enhanced partnership with stakeholders, more issuance of regulations concerning CCS projects, and exploring financing options.
Towards the closing of the presentation session, Dr Sidemen highlighted the increased momentum of CCS/CCUS projects in recent years. ‘Currently, more than 50 implementing CCUS power plants in various stages of development are in the pipeline,’ he shared, adding that its feasibility was due to supporting government policies, especially in the US, the EU, Canada, and China. Indonesia could further utilise CCS to optimise existing power plants to meet its growing electricity needs. He stated, ‘In PLN’s strategic plan, they are projected to install a supercritical CCUS around 10 gigawatts (GW) by 2050 and will operate ultra critical power plant from 2045 – 2056 with a total capacity of 29GW.’ To support the commercial deployment of CCS projects and lower the cost of energy use and costs of power plants using CCS, research on methods, such as monoethanolamine-based carbon capture, will need to be further explored. Dr Sidemen remarked that financial availability, environmental considerations, and a good regulating framework should be prerequisite conditions for undertaking CCS projects.
During the Open Discussion session, a question was raised about Sumitomo Corporation’s capture cost estimates of $30 per tonne of CO2. Mr Kunihiro clarified how capture costs vary depending on the technology and CO2 volume thus it can also reach $60 per tonne of CO2 or exceed $100 per tonne; the company’s research is based on 13MT of CO2. He also explained that maximising CO2 capture efficiency is integral to CCUS feasibility studies; Sumitomo’s research assumed 95% CO2 capture efficiency. For a question regarding the decision to select a storage site that is far from TJB Units 5 and 6, Mr Kunihiro stated it was due to an arrangement made with the research partners for data availability purposes. However, he reaffirmed that a CCS value chain should have an emitting source and CO2 storage site that are closely situated to minimise the CAPEX, OPEX, and total unit costs.
On the future of unit cost, Mr Sato shared that scaling up and new technologies will be important to significantly reduce future costs. Carbon pricing will also be essential which Mr Sato believes is ‘needed to implement [in] this new industry like CCS.’ For Asia to decarbonise, Mr Kunihiro finds that various financing support from national governments and as a region could optimise the viability of CCS projects. When prompted about Sumitomo Corporation’s stance on investing in Cambodia for CCUS, Mr Kunihiro and Mr Sato welcomed such possibilities and encouraged the country to push for government support for the implementation of CCUS, so it reaches a commercial scale. The final question was about cross-border regulations or global agreements for the cross-border transportation and storage of CO2. Mr Kunihiro and Mr Sato referenced the Paris Agreement and the London Protocol and underlined the need to ensure CCS regulations are detailed to answer concerns on matters such as party responsibilities for CO2 leakage.
In his Closing Remarks, Dr Han Phoumin, Senior Energy Economist, ERIA encouraged stakeholders to further examine the CCS value chain and explore ways to reduce the overall costs of this technology. Sumitomo Corporation’s study has indicated the impact CCUS will have on electricity and transportation costs, and the capital required to develop and maintain it. Carbon pricing and carbon utilisation are some methods to lower overall costs. Dr Phoumin ended his speech by expressing his hope that discussions about the report will follow to explore possible solutions for CCS development in Asia.
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